Is It Time To Get Back Into Financial Stocks?
Some analysts say a recession is coming and some say it isn’t. What is for certain is that the stock market has grown increasingly volatile since the summer. While this increases the risks for investors it also increases the chance for reward.
Large movements swings have been the norm the last few months depending on whether the daily news was good or bad. If you had idling cash lying around it would open the opportunity for some serious bargain hunting. There are quite a few stocks that are trading below their historical PE or price to earnings ratios.
Now the big question for many bargain hunters is whether it’s time to jump back into financial stocks or not. There are some big names out there that have lost a large chunk of their market values after they started reporting huge writedowns during the month of November.
While some of them do look tempting, I believe it’s still too early to jump back into financials. Another surge in defaults is expected after rates adjust upward this quarter for the many ARMs that weren’t affected by the government’s bailout plan. There is also the fact that we are still in a credit crunch and while we may get it under control sometime soon in this country, that may not be the case for the rest of the world.
The housing market is also expected to continue it’s slump well into this year and possibly the next. So, while the financial sector may get it’s house in order and implement smarter lending practices, at least in the short run there just won’t be as many avenues open for profit potential as there were in the past.
However, this is definitely a sector that needs close attention in the next few months. Finding the right time to get back into these stocks should net you a tidy bit of profit as they climb back to their historical PE levels.
